Labor As THE Supply Chain Disrupter

by Michael Haberman on October 31, 2006 · 1 comment


The October 31st issue of the online The McKinsey Quarterly discussed a global survey of executives on supply chain issues. According to this report “Nearly two out of three executives who responded to the latest global survey of business executives conducted by The McKinsey Quarterly1 say they face increasing risks to their ability to supply their customers with goods and services cost effectively.” Further they say “Most of the surveyed executives say supply chain risk is growing . The executives most likely to say that their company’s level of risk has risen are those in retailing, manufacturing, and energy; those in the energy industry are by far the most likely to say their risk has increased significantly. Professional-services executives are the least likely to have seen an increase in risk, but even there, nearly half have done so. Executives at all levels share the view that risk is on the rise.”

Topping the list of risks most likely to disrupt supply chains is the availability and quality of LABOR. This was true around the world, with the exception of Latin America, where regulation was the reason at the top of the list. “Among respondents who identify labor as a significant issue, almost two-thirds are primarily concerned about the availability of well-trained labor. Indeed, though the level of concern varies somewhat, a shortage of high-quality employees remains the top issue among those concerned about labor, regardless of their company’s size or location. Among those concerned about labor, labor cost is their biggest worry; only 3 percent of them cite labor disruptions and less than 1 percent of this group cite diseases or pandemics.” Despite this few executives said they had formal program to access the risk and fewer still said they had plans to mitigate the risks.

This is the challenge to pro-active HR departments. Get your executives to understand the “people” issue of supply chain problems. What are the disruption possibilities in your industry? Feeling them already? What are the possible solutions to this disruption?

  • Better hiring?
  • Better and more training?
  • Better sourcing of candidates?
  • Better retention?
  • Changes in technology to remove more “bodies” from the equation?

Of course to make this argument the HR executive needs to understand supply chain management for their industry. If you can’t make your suggestions in terms the executives can buy into then they will not listen.

But this is your chance to make a major impact on your company.

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{ 1 comment… read it below or add one }

peter February 19, 2008 at 7:21 am

In my opinion labor is the starting link in the supply chain the future of a company depend upon the quality of labor. If a company is not focused to wards there labor then it is at risk.

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